If a stock's returns tend to move in the opposite direction of the general stock market, its market-beta will be
A)equal to 0.0.
B)a negative number.
C)greater than 1.0.
D)a nonsensical number.

Question

Quizplus · Accepted Answer

A negative beta indicates that the stock tends to move in the opposite direction of the market. A beta of 0.0 implies no correlation with the market, a beta greater than 1.0 indicates higher volatility than the market, and a nonsensical beta value would not be possible in the context of stock market analysis. A stock with returns that move in the opposite direction of the general stock market will have a negative correlation coefficient with the market, resulting in a negative market-beta.

If a Stock's Returns Tend to Move in the Opposite